Sunday, November 29, 2015

On The Just Concluded West African Power Industry Convention 2015

Matters Arising (Part 1)

By Idowu Oyebanjo

The just concluded West African Power
Industry Convention (WAPIC 2015) event held from 23rd till 26th November 2015
at Eko Hotel and Suites, Lagos
was a strategic hub for stakeholders looking for collaboration and joint
solutions to the intractable challenges bedevilling the electrification of the
West African sub-region. The main focus was the status of the Nigerian Power
Sector reform. Some of the key conclusions from the event are highlighted below:

1. There
is an urgent need for the new Minister in charge of Power to put together a
team of technocrats with proven expertise to review the status of the power
sector reform with a view to establishing and possibly dismantling bottlenecks
in the entire value chain of generation, transmission and distribution of electricity
in Nigeria.
This team, which must be apolitical, will review existing laws, policies and
processes as they affect the dismal performance of the reform despite humongous
amount of investment in the last 20 years. Serving as a "system
architect", it will take a holistic view of the entire system from
end-to-end, ensuring synergies between parallel and hitherto conflicting
activities which have more often than not led to policy reversals and
summersaults creating thus far the volatility, uncertainty, complexity and
ambiguity experienced in the Nigerian Electricity Supply Industry (NESI) to the
sheer embarrassment of all stakeholders.

2.To be
able to sustain NESI, there is an urgent need for a clear focus on localisation
and capacity development for the power sector work force by strictly
implementing the Nigerian Content development regulation, establishing a power
academy (university for the power sector) and apprenticeships that fit into the
National Vocational Qualifications (NVQs Levels 1-6), as well as provide funding for training and research
grants focusing on specific areas of need of NESI.

3. It was
generally accepted that the portfolio of energy mix for generation of
electricity should include renewable energy for off-grid connectivity under the
existing rural electrification projects. A clear message that Nigeria should
not and does not need renewable energy systems to meet the challenges posed by
huge deficit in power it faces currently was passed. This was thoroughly
reviewed in view of the scale of investment, expected impact and power system economics.
Rather, as far as concentration of investment in fuel supply requirements to
provide respite in the shortest possible time frame is concerned, gas must be made available to gas fired
power stations dotted around the country to generate electricity for evacuation
via a network of strengthened Transmission and Distribution Assets by
technically qualified personnel working in the envisioned NESI.

*Fashola, Nigeria's Minister of Power

4.All stakeholders agreed on the need for a Cost
Reflective Tariff (CRT) but disagree on the implementation as the process needs
to be transparent in all ramifications. Also, customers must be metered and the
provision for estimated billing abolished as it does no good to both network
operators and consumers of electricity. There is a dire need for re-orientation
and re-evaluation of the payment culture of consumers just as the menace of
electricity theft must be curtailed to guarantee the survival of the reform
process.

5. Financial Intervention is a fundamental
requirement for the power sector reform in Nigeria but disbursement must be by
the output measure technique where financial intervention is linked to specific
outputs expected in the overall performance and health indices of different
items of plants on the power network over a given period of time. Scheduled
payments to benefactors will be based on verifiable investment which translates
to a quantum leap in electricity made available to consumers. This may be in the
form of loan facility or percentage stake of government in NESI. Whatever the
case, a lean on the shares of defaulting operators will be enforced as a means
to guarantee performance.

6.Weak regulatory framework, issuance of many
contradictory and unclear policies send the wrong signals to potential
investors. Hence, there is need for strategic governance that ensures policies
are well-thought through before they are made and the potential impact on the
credibility of the reform process is evaluated before any policy reversal is
mused. Today, a country like Ethiopia
attracts foreign direct investment (FDI) and other investor funds ahead of Nigeria because large fund owners perceive Nigeria to be a
risky place to do business. To reverse this ugly trend, governance and
regulatory framework need to be strong, policies must be clear with appropriate
legal and regulatory framework, contracts must be enforceable, projects must
have commercial viability, and the Banking sector reform must continue until
local Banks can access finance from international finance institutions (IFIs).
To do this however, the media will also play a part in ensuring the country is
projected positively to the rest of the world as the aforementioned changes are
made.

7. The need for accurate and up-to-date data for
NESI cannot be over-emphasised. The successful planning, operation,
maintenance, protection and control of a functional electric power system
depends hugely on data. The starting point is the data or information relating
to the actual load demand and specific information relating to individual
customers connected to the grid. In this regard, the 5.9 billion naira loan
granted TCN recently by the World Bank is a welcomed development.

8. Network operators must embrace operational
efficiency rather than requesting for an increase in tariff as this alone will
not solve the problem on hand. As far as progress in the last 20 years is
concerned, the quantum of electricity generated and transmitted for
distribution before and after privatisation has remained roughly the same. Peak
generation as at the end of December 2012 was 4,518MW and it is around 4,883MW
now.

Therefore,
in the short term, one expects Nigerian government to focus on training and
human capital development, provide gas as a minimum to the NDPHC power plants
and fix the liquidity problem within NESI. In the medium term, effort must be
made to implement a 20,000MW (20GW) integrated energy system whilst capacity,
security of supply of gas and electricity, power quality, customer service, and
so on are to be long-term initiatives.

Idowu Oyebanjo, a power system engineer was a delegate and speaker
at the conference.